The Role of Strategy

COMPETING IN
„ What is strategy?
TODAY’S ECOMONY
„ Why is it important?
„ What influences strategy?
The Role Of Strategy

Hilary Lewis. BSc, MA

The Role of Strategy 2

Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

Strategy is….. Strategy is…..

……. derived from the word Stratagem which ……. derived from the word Stratagem which
means: means:
1. a cunning plan or scheme, esp. for deceiving an
enemy.

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

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Strategy is….. Strategy is…..

…quoted in the Concise Oxford Dictionary

……. derived from the word Stratagem which as meaning;
means:
1. a cunning plan or scheme, esp. for deceiving an
enemy.
2. trickery

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

Strategy is….. Strategy is…..

…quoted in the Concise Oxford Dictionary

…quoted in the Concise Oxford Dictionary as meaning;
as meaning; 1. the art of war. 2a the management of an army or
1. the art of war.
armies in a campaign. b the art of moving troops,
ships, aircraft, etc. into favourable positions (cf.
TACTICS). c an instance of this or a plan formed
according to it.

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

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Strategy is….. Organizational Strategy is…..

…quoted in the Concise Oxford Dictionary

as meaning; ………the way in which an organization
1. the art of war. 2a the management of an army or uses its knowledge and other resources
armies in a campaign. b the art of moving troops, to achieve its economic purpose.
ships, aircraft, etc. into favourable positions (cf.
TACTICS). c an instance of this or a plan formed
according to it. 3 a plan of action or policy in
business or politics etc. Haberberg and Rieple.
The Strategic Management of Organisations. 2001

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

The Nature Of Strategy Levels of Organizational Strategy

Corporate
Corporate Head Office
Strategy
Range Of Strategic Format
Business Division A Division B
Strategy

• Defined • Vague R&D R&D

• Planned • Loose Human Resources Human Resources

Functional
• Proactive • Reactive Strategy Finance Finance

• With detail • No detail Production Production

Marketing/Sales Marketing/Sales

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

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The Purpose of Strategy The Purpose of Strategy

„ Provides direction
‘The essence of strategy is coping with competition.
„ Provides coherence The corporate strategist’s goal is to find a position
in the market where his or her company can best
„ Allows day-to-day processes to be
defend itself against the collective industry forces
designed or can influence them in its favour.’
„ Should give direction for ‘one off’
procedures Michael E. Porter. ‘How competitive forces shape strategy’
Harvard Business Review, 1979

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

The Nature of Strategic Decisions Influences on strategic choices

„ Magnitude
„ Organizational Purpose
– BIG DECISIONS
„ Time-scale
– Medium to long term
„ Commitment
– Locks in resources, locks out alternatives

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Organizational Purpose Organizational Purpose
Corporate Governance
Business Ethics
• Whom should the
• Which purposes
organization serve?
should be prioritised?
• How should purposes be
• Why?
determined?

Organizational Purpose Organizational Purposes

• Vision / Mission • Vision / Mission
• Objectives • Objectives

Stakeholders
• Whom does the
organization serve?
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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003
Cultural Context
• Which purposes are
prioritised?
• Why?
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Influences on strategic choices The PESTEL Framework

„ Organizational Purpose „ Political

„ The Macro-Environment

Example of Political influences;

• Taxation Policy
• Foreign Trade Regulations

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

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The PESTEL Framework The PESTEL Framework

„ Political „ Political
„ Economic „ Economic
„ Sociocultural
Example of Economic influences; Example of Sociocultural influences;
• Interest Rates • Attitudes to work and leisure
• Inflation • Income distribution
• Unemployment • Levels of education
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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

The PESTEL Framework The PESTEL Framework

„ Political „ Technological „ Political „ Technological

„ Economic „ Economic „ Environmental
„ Sociocultural „ Sociocultural

Example of Technological influences; Example of an Environmental influences;

• New discoveries, developments • Emission levels
• Spending on research • Planning regulations

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The PESTEL Framework The Impact Of The New Economy
‘The New Economy is shorthand for nothing
less than a revolution in the way business
„ Political „ Technological
works, economic wealth is generated, societies
„ Economic „ Environmental are organized, and individuals exist within them.
Today’s realities are telephone-based service
„ Sociocultural „ Legal centres in India serving US consumers, and
new technologies underpinning extraordinary
Example of Legal influences; shifts in everything from food production to the
• Monopolies Commission health products addressing long standing
• Employment Law tropical diseases.’
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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

New Vs Old Economy

The Impact Of The New Economy
Old Economy New Economy
Computers / software,
Oil, mining, steel, vehicles,
‘The knowledge and information revolution Key Industries railways, shipping
biotechnology, entertainment,
financial services
provides a historic opportunity, a new age with Key Resources Energy, labour Information, knowledge, talent

enormous potential in promoting Technology Power trains, machine tools Information technology
competitiveness, new economic growth and Product Life cycles Measured in decades Measured in years or months
jobs, better access to basic services bigger Trade Pattern International Global
impacts from education and health interventions Working Day 8 hours 24 hours
and most importantly, enhanced empowerment
Communication Media Letter, fax, telephone, telex Email, mobile phone, WWW
of local communities and stronger voices for Organizational Centralised, hierarchical,
poor people.’ Structures functional
Devolved, flat, flexible

Workforce Male dominated, semi skilled No gender bias; high

James D Wolfensohn, President of the World Bank. 2001 Characteristics or unskilled proportion of graduates

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Influences on strategic choices The Industry Lifecycle
100

80

„ Organizational Purpose 60

40

„ The Macro-Environment 20

„ The Industry Environment 0

Development Growth Shakeout Maturity Decline

Innovators Early adopters Early Majority Late majority Laggards

BUYERS
Growing number Many competitors
Few of competitors Price wars to Divesting by some
Competitive competitors
to shakeout of
maintain share competitors
‘Me too’ products weakest
conditions High costs; Lower margins Little product
Start to compete Product differentiation
low profits differentiation
for market share

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

Porters Five Forces Model Influences on strategic choices

Threat of
new
entrants
„ Organizational Purpose
The Industry
Bargaining
power of
Bargaining
power of
„ The Macro-Environment
Jockeying for
suppliers position amongst customer
current „ The Industry Environment
competitors
„ Competitive Positioning
Threat of
substitute
products or
services

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Competitive Positioning Competitive Positioning

Market segmentation… Developing the Proposition

..dividing a market into distinct groups of Choose a broad positioning

buyers with different needs,
characteristics or behaviour, who might Choose a specific positioning
require separate products or marketing Choose a value positioning
mixes

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

Broad Positioning Alternatives Positioning Strategy

1. Become the best at one of the three disciplines.

2. Achieve an adequate performance level in the other

„ Product differentiator two disciplines.

„ The low cost leader 3. Keep improving one’s superior position in the
chosen discipline so as not to lose out to a
„ Nicher competitor.

4. Keep becoming more adequate in the other two

disciplines, since competitors keep raising
customers’ expectations about what is adequate.

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Influences on strategic choices (cont) Resources

„ Organizational „ Resources
Purpose
„ Capabilities and competencies
„ The Macro-
Environment „ Learning and knowledge

„ The Industry „ Analysing competitive advantage

Environment
„ Competitive
Positioning
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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

Influences on strategic choices (cont) The Value Chain

„ Organizational „ Resources Firm Infrastructure

Purpose „ The Value Chain
Support Human resource management
M

Activities
ar
g

„ The Macro- Technology Development

in

Environment Procurement

„ The Industry Marketing

n

Inbound Outbound Service

Environment
gi

Operations and
ar

Logistics Logistics
Sales
M

„ Competitive
Positioning
Primary Activities
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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

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Influences on strategic choices (cont) Organizational Structure

„ Organizational „ Resources
Purpose „ The Value Chain „ Structure types
„ The Macro-
„ Organizational „ Organizational design
Environment Structure
„ The Industry „ Communication
Environment
„ Competitive
Positioning

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Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003 Professional Studies 4 - Lecture 1 Hilary Lewis – October 2003

Influences on strategic choices (cont) Organizational Culture

„ Organizational „ Resources
„ Leadership behaviour
Purpose „ The Value Chain
„ The Macro- „ Reward systems
„ Organizational
Environment Structure „ Language
„ The Industry
„ Organizational
Environment Culture
„ Competitive
Positioning
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